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7/29/2010 8:07AM

Bankers: Don't Think Rush of Rules Will End Soon

Bankers who think the Dodd-Frank Act is the final episode of rulemaking for banking are wrong, Pippa Malmgren, president of Principalis Asset Management, tells Dow Jones Investment Banker's Joe Ortiz. Legal action against banks is inevitable and will produce more rules. Capital charges on risk activities should be imposed.

This transcript has been automatically generated and may not be 100% accurate.

go ... you'll see ... with the Moncton ... use Form ... advises George will show I mentioned this in many is ... an investment by now this isn't ... the printing of this asset management ... high but I found ... you advise ... me ... on my Nietzsche's ... Runkle local ... what rights you should be to break nation of the financial markets ... has a lot going on in that area right now ... and what would you pick ups is the most important things happening ... well ... first I say people are probably paying too much attention to the specific contents of ... this new by Dodd Frank legislation ... because there's two main instead it's ... the end of the story and that that sets the rules of the game in fact it's the opening salvo ... and what will happen now is the way the regulators apply not only these numerals but the existing roles than ever and force before ... that is more likely to affect the landscape ... in addition I think there's still a prosecution story where the ... prosecutors in the U S will continue to laughter Bank's banking practices bankers ... and everytime we another a rest or criminal or civil charges brought against the firm or individual ... this incentive buys more rolls a more regulation a more forceful enforcement ... on to cut its U K process and then finally at tax ... rate for people to pay a lot of attention to tax because tax rates are going to go up and that affects every ... financial transaction need to carry on into question ... what is the risk reward Icahn is trying to achieve and what is the tax jurisdiction ... to as the loopholes closed the offshore tax ... havens go away ... tax rates go up it's kind of push ... the investment banks have to innovate and create new products ... I in new locations and ... I have a couple of examples of that but I think that the ... relevant with the hind ... leg in our member in nineteen sixty two John F Kennedy won Teresa money ... high and the Fed to apply attacks to global ... financial services in the same way they were discussing today in the regulatory community ... on the FA set up a bit of a tax on all bond sales ... answer a couple of interpreting guys got on a plane went to London for that we can sell these bonds from London and now the subject of attack and this was the beginning of the euro bond market ... I think that is what investment banking is going to be doing in the next few years innovating and the future it is to meet additionally when this been the crisis ... indeed when new rules the ... approach in ... its traditional ... investment bikers find a way round ... it ... is is there any way that the regulates and supervises can keep up with them ... well now ... I think it's a lot like the around the world he operates ... and the market aircraft with that fact most sophisticated boats and best technology ... the regulator granted dinghy ... and to the canteen where the races their honor on the horizon ... so the problem is if you try to use rules and regulations as your main mechanism of containing the market you can never keep up the market will innovate its way out of your reach ... however if you focus on what are the incentives that were created ... that's an easier way to change the behavior of the market even if you can see if their activities ... I don't think there's been much attention paid for example in this legislative process to what incentives ... exist or are we creating ... much more attention is paid to OK what are the new rules that the roles been written yet mark the end of the banks of cleverly get around on the third time ... the purpose of markets is the sale is close to the when is possible the stocks with Maxim profits are ... to come back and sent it I think are more important now come the incentive aligns them to ... stick to the rules on them to stay on the bright side of the line ... well I have some views on this for example I am I mean there's a lot like water and then makes its way or the profits are ... high so if you apply capital charges to certain activities and this is an incentive to not place too much risk in these areas as an example one could argue that much of what caused the current crisis was ... the result Apple a charge applied to most off balance sheet in the sun actually all the money when off balance sheet ... um and so the question is how to apply capital charges not make sense to apply a couple turns to him ... the view that the ball discussion I say it is not going to hurt the banks because the ball folks are too afraid to apply new capital charges to serve the banks a few apply this to me it will kill me and you don't want that ... and I think are other ways to think about ... how to have some kind of uprights ... Creagh AG in a particular activity ... that would bring more discipline to the process in May the ball is not the only mechanism for bringing out about we should think about that from and aims ... to seize the moment the Jones Investment Banca retook the pit the Volcom principle is asset management ...